EBITDA Bridge Calculator

An EBITDA bridge — sometimes called an EBITDA walk or a quality-of-earnings reconciliation — is the line-by-line derivation of a company's "adjusted EBITDA" number from its reported net income at the bottom of the P&L. It is the single most scrutinised exhibit in middle-market M&A diligence, because every dollar that ends up in the adjusted number multiplies through the deal multiple and becomes additional purchase price. On a typical 7x EBITDA deal, a $400,000 line item — a one-time legal settlement, a discontinued product, an owner driving the family Range Rover on the company books — becomes $2.8 million of valuation. The seller and the buyer spend more time arguing about the bridge than about any other single number in the diligence process.

Despite how central the bridge is to every M&A deal, no free interactive web tool existed for building one before this calculator. Every search result is either an educational article from Wall Street Prep, a downloadable Excel template gated behind an email signup, or a paid-only feature of an enterprise diligence platform. This page fills that gap with a calculator that runs entirely in your browser, accepts unlimited add-back rows, flags aggressive normalisation patterns, and emits a clean waterfall ready to drop into a CIM exhibit or a diligence memo.

The first half of the bridge is mechanical: net income plus the four canonical EBITDA add-backs (interest, taxes, depreciation, and amortization) gives you reported EBITDA. This is a GAAP-derivable number and there is nothing to argue about.

The second half is where the work happens. Adjusted EBITDA layers on "normalisation" add-backs that management argues are not representative of the company's run-rate earnings power. Each add-back falls into one of four standard categories: non-recurring items (one-time legal settlements, restructuring, transaction fees), owner-related items (above-market compensation, personal expenses, family members on payroll), stock-based compensation (sometimes contested), and "other" normalisations (discontinued product lines, lost-profit-from-COVID arguments, out-of-period revenue catches).

Quality-of-earnings providers see thousands of bridges a year and have very strong opinions about which add-backs survive scrutiny. The defensible items are: documented one-time legal settlements that have already been paid, restructuring costs with associated severance agreements on file, M&A and capital-raise transaction fees with invoices, owner compensation above an independently benchmarked market rate, family members on payroll who perform no work, personal expenses run through the business with documentation, and discontinued product lines that the buyer will not assume.

The aggressive items that QoE providers consistently reject are: "lost profits" from any prior difficult period, expected future synergies from M&A that has not yet happened, growth investments reclassified as non-recurring (R&D, sales-team build-outs, marketing campaigns), one-time customer wins treated as recurring revenue, and any add-back without contemporaneous documentation. The calculator above flags any bridge where add-backs exceed 20% of reported EBITDA — that threshold roughly maps to the level at which institutional buyers will require independent QoE verification.

The bridge is the input to the deal multiple in a sell- side process, so the next step in any diligence workflow is usually feeding the adjusted number into the DCF calculator for a standalone valuation, the LBO calculator for a sponsor returns analysis, and the accretion / dilution calculator for a strategic-buyer EPS impact assessment.